Why Australians Chase $5 Cashback While Ignoring $65,000 in Savings

Why Australians obsess over small savings while ignoring the biggest financial lever they have

Picture this: A Sydney homeowner spends 20 minutes each week hunting for grocery specials across multiple apps, driving to different supermarkets, and scanning receipts for cashback. Annual savings? Perhaps $300 to $500. Meanwhile, the same person has not reviewed their home loan in five years, quietly paying a 'loyalty tax' that costs them thousands annually and potentially $66,000 or more over the life of their loan.

This is not a failure of intelligence. It is a feature of human psychology operating in a financial environment designed to exploit it.

The Scale of the Problem

Australia's mortgage market now exceeds $5.3 trillion, with the average new home loan sitting at $678,000. According to the ACCC's Home Loan Price Inquiry, borrowers with loans between three and five years old pay an average of 0.58 percentage points more than new customers. For those who have held their loan five to ten years, the gap widens to 0.71 percentage points.

What does this mean in dollar terms? A borrower with a $600,000 loan paying just 0.5% above market rates loses approximately $3,000 in the first year alone. Over 25 years, that adds up to more than $66,000 in unnecessary interest. Yet research from Mozo reveals that 41% of Australian mortgage holders do not even know their current interest rate.

Meanwhile, Australia's cashback market is booming. Industry analysis projects cashback spending to surge from $5 billion in 2023 to over $10 billion by 2029. Australians are downloading apps like Shopback and Cashrewards, hunting for savings that typically amount to $300 per year.

The contrast is stark: we chase $300 with the intensity of hunters, while letting $66,000 slip through our fingers.

The Return on Your Time

Consider the hourly return on different savings activities:

• Chasing fuel prices: 15 minutes per trip, 26 trips per year, saving roughly $150. That is about $35 per hour (before taxes).
• Using cashback apps: 2 minutes per transaction, 150 transactions per year, saving roughly $300. That is about $138 per hour before taxes.
• Reviewing and optimising your home loan: 5 hours total effort, saving $3,000+ per year. That is equivalent to earning $780-1000 per hour before taxes.
• Switching to a better super fund: 2 hours total effort, potentially worth $100,000+ over your working life (or $3,300 per annum). The hourly return is equivalent to approximately $2,500 before taxes.

There is no cashback app on earth that delivers $700-1,000 per hour. Yet we gravitate to the small wins while avoiding the big ones.

Why Our Brains Get This Wrong

Behavioural economics, the field pioneered by Nobel laureates Daniel Kahneman and Richard Thaler, explains why otherwise intelligent people make these systematically poor trade-offs.

We Bikeshed

Parkinson's Law of Triviality, known as 'bikeshedding', describes our tendency to spend disproportionate time on trivial issues because they are easy to grasp, while neglecting complex but important problems because they are abstract and intimidating. Fuel prices and grocery specials are simple. Everyone understands $5. Mortgage amortisation schedules and comparison rates are not. So we obsess over the bike shed while the nuclear plant goes unexamined.

Immediate Rewards Feel Better

When you scan a receipt and see 'Cashback Tracked', your brain gets a small dopamine hit. The reward is instant and tangible. But mortgage savings are spread across decades, making them psychologically 'smaller' despite being financially larger. This is called hyperbolic discounting: we massively overvalue rewards we can see right now.

Inertia Is Powerful

Status quo bias means we prefer the current state of affairs, even when change would benefit us. Banks understand this perfectly. As the ACCC noted, factors like complex paperwork, unclear pricing, and time costs stand in the way of switching. But research shows that 62% of people who actually switch find it 'easy' or 'very easy'. The barrier is largely psychological, not practical.

Complexity Triggers Avoidance

Downloading a cashback app takes two minutes. Comparing home loan rates and refinancing can feel like it takes weeks. Our brains naturally gravitate toward simple tasks with clear outcomes. This is not laziness; it is cognitive economics. We have limited mental bandwidth, and complex tasks feel costly even when the financial return is enormous.

The Mortgage 'Loyalty Tax' in Detail

The 'loyalty tax' is not a glitch in the system. It is a business model. Banks offer better rates to acquire new customers, then rely on inertia to quietly charge existing customers more.

Here is what the loyalty tax looks like across Australia:

• New South Wales: Average mortgage $816,000. At a 0.5% loyalty tax, that is $4,080 per year, or $340 per month.
• Victoria: Average mortgage $639,000. Loyalty tax costs approximately $3,195 per year.
• Queensland: Average mortgage $662,000. Loyalty tax costs approximately $3,310 per year.
• National average: $678,000 mortgage, $3,390 per year in unnecessary interest. That is more than ten times the average cashback saving.

The PEXA Refinancer Sentiment Report found that homeowners wait an average of 5.6 years before refinancing. And crucially, 55% of refinancers stayed with their existing lender, even though significantly better deals were typically available elsewhere.

Superannuation: The Same Problem, Longer Timeframe

The same behavioural forces affect superannuation, but with even longer time horizons. A 0.5% difference in super fees can reduce your final retirement balance by approximately 12%. For an average worker, that is roughly $100,000 in lost retirement savings.

In 2024, 37 out of 192 super platform products failed APRA's performance test. Yet member movement remains sluggish. The ATO's YourSuper comparison tool makes switching straightforward, but unlike Shopback, it does not gamify the experience or deliver dopamine hits. Government utilities struggle to compete for our attention.

For most people, however, the mortgage is the more immediate priority. It is the larger debt, the higher monthly cost, and the easier fix.

What to Do About It: A Practical Guide

Understanding why we make these errors is the first step to correcting them. The good news is that behavioural economics does not just diagnose problems; it offers solutions.

1. Schedule Your Annual 'Financial Health Check'

The most effective intervention for status quo bias is making action the default. Put a recurring annual appointment in your calendar. On this day, you commit to checking your mortgage rate against current market offers and reviewing your super fund's performance and fees. The calendar reminder overcomes the 'I will do it later' trap.

2. Calculate Your Hourly Rate

When you feel too tired to deal with your mortgage, do the maths. If reviewing your loan takes 5 hours and saves $3,000 annually, you are earning $600 per hour (tax free) for that effort. Write down the number. Ask yourself: 'Can I afford to turn down a job that pays $923 an hour (before taxes)?' This reframing makes the abstract concrete.

3. Make the First Step Tiny

The biggest enemy of financial optimisation is overwhelm. Do not try to refinance today. Just find out your current rate. Log into your banking app, find the number, write it down. That is it. Once you know the number, you will naturally want to compare it. Small steps overcome complexity aversion.

4. Use a Service That Does the Heavy Lifting

The reason cashback apps succeed is that they reduce friction to near zero. The same principle can work for mortgages. Home loan optimisation services compare rates across dozens of lenders, calculate total costs including fees and rebates, and monitor your rate ongoing so you do not have to remember to check annually. They turn a complex, intimidating task into something closer to the frictionless experience of a cashback app.

Monetas, for example, compares loans from over 80 lenders, including those who do not pay broker commissions, and calculates the true total cost rather than just the headline rate. They also provide ongoing monitoring, alerting you when a better deal becomes available. This addresses the core behavioural barriers: complexity is reduced, the default becomes optimisation rather than inertia, and you do not need to rely on willpower to remember to check.

5. Reframe the Numbers

Mental accounting works against you when savings feel abstract. Make them concrete. Instead of thinking 'I could save $3,000 per year by refinancing', calculate what that buys: '$3,000 is a family holiday' or '$250 per month covers my electricity bills'. Suddenly the abstract interest saving becomes a tangible lifestyle benefit that can compete with the dopamine hit of a cashback notification.

6. Create a Commitment Device

Tell your partner or a friend that you will review your mortgage by a specific date, and ask them to check in. Book an appointment with a broker. Having an external commitment makes procrastination costly. Some people find success in 'paying themselves' for completing financial tasks: allow yourself a small treat only after the annual mortgage review is complete.

The Bigger Picture

Australia's household savings paradox is not a moral failing. It is a design problem. The commercial world is built to keep us focused on the micro, the immediate, and the trivial. Cashback apps are engineered to be frictionless and dopamine-inducing. Mortgage comparison is engineered to be complex and intimidating.

The financial industry understands our biases and often exploits them. Banks offer headline rates to new customers while quietly extracting loyalty premiums from existing ones. Supermarkets design reward programs that feel rewarding while delivering modest absolute value.

The question for households is whether to remain passive participants in this system or to consciously redesign their financial lives. The evidence is clear: Australians who regularly review their financial products save tens of thousands of dollars over their lifetimes. The tools to join them are available.

The $5 cashback can wait. Your mortgage review cannot.

Frequently Asked Questions

How do I find out my current mortgage rate?

Log into your online banking, check a recent statement, or call your lender. Many Australians do not know their rate, which is the first barrier to optimisation.

How much could I save by refinancing?

It depends on your current rate and loan size, but the average loyalty tax is 0.5% or more. On a $600,000 loan, that is roughly $3,000 per year, or $66,000+ over the life of the loan.

Is refinancing difficult?

Research shows 62% of people who refinance find it easy or very easy. The perception of difficulty is usually worse than the reality. Using a broker or home loan optimiser simplifies the process significantly.

How often should I review my home loan?

At least annually. Lenders frequently adjust rates and offers. A loan that was competitive two years ago may no longer be. Some services offer ongoing monitoring so you do not have to remember to check.

What is the best way to compare home loans?

Compare as many lenders as possible and focus on total cost, not just the headline rate. Home loan optimisers like Monetas compare 80+ lenders and calculate true total cost, including fees, features, and rebates.

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About Monetas

Monetas is an Australian home loan optimiser that helps borrowers reduce the long-term cost of their home loan. We compare loans from 80+ lenders, including those who do not pay broker commissions. We also have ongoing rate monitoring so your loan is competitive over time. If you find a better deal, we will match it or pay you $1,000; see our savings commitment for full terms and conditions.

Sources

• Money.com.au National Mortgage Insights Report
• Australian Competition and Consumer Commission, Home Loan Price Inquiry, 2020
• Refinancing insights 2024: Mozo’s report into the cost of home loan loyalty
• Research and Markets: Australia Cashback Programs Market Opportunities Databook
• PEXA Refinancer Sentiment Research
• APRA Superannuation Performance Test Results
• Thaler, R.H. (1999). Mental Accounting Matters. Journal of Behavioral Decision Making
• Samuelson, W. & Zeckhauser, R. (1988). Status Quo Bias in Decision Making. Journal of Risk and Uncertainty

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